Portfolio Selection Utilizing Analytical Hierarchy Process (AHP) with Mean Variance Theory and Safety-first Model: A Study on the Top 30 Companies in the Philippine Stock Exchange

This study explores the integration of the Analytical Hierarchy Process (AHP) with Mean-Variance Theory and the Safety-First Model for optimal portfolio selection in the Philippine Stock Exchange (PSE). AHP, a multi-criteria decision-making tool, helps prioritize assets based on risk and return, while Mean-Variance Theory emphasizes diversification and the risk-return trade-off, and the Safety-First Model focuses on downside risk management. The research evaluates the top 30 companies in the PSE, addressing emerging market challenges such as high volatility, political instability, and limited liquidity. Backtesting from 2018 to 2022 demonstrates that Safety-First portfolios yielded higher returns but also higher risks compared to the benchmark, while Mean-Variance portfolios provided a balanced risk-return profile. The findings suggest that integrating AHP with these models offers a robust method for portfolio selection, balancing risk and return, and contributes to investment decision-making in volatile markets. The study highlights the advantages of tailoring investment strategies to investor preferences and the specific conditions of emerging markets. Future research could incorporate actual investor preferences and transaction costs to refine the model further.